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US hedge fund Gramercy has struck one of the largest ever litigation funding deals to back separate trials starting next year in mass environmental claims against miners BHP and Vale and 14 global carmakers.
The $552.5mn funding is in the form of a secured loan to law firm Pogust Goodhead, and is the largest ever to a UK law firm in the nearly $16bn litigation funding market.
The law firm is bringing the UK’s biggest opt-in class action lawsuit on behalf of 700,000 Brazilian claimants from the two mining firms over the 2015 collapse of the Fundão tailings dam at the Samarco Mariana mine complex. The eight-week trial is scheduled to start in London in October 2024. The claimants are seeking recompense for alleged damage to their homes and livelihoods from the disaster.
Pogust Goodhead is also behind more than a dozen lawsuits on behalf of 1mn UK customers of 14 carmakers involved in the dieselgate scandal. The firm has already struck a £193mn settlement with Volkswagen over claims it misled consumers about nitrogen oxide emissions from its diesel cars. A claim against Mercedes is scheduled to go to trial next year.
The funding commitment is a substantial one for Gramercy, which has $6bn in assets under management and is best known for its emerging markets bets on Russia and Argentina. The loan includes co-investments from some of its clients.
Such investments have become a key part of Gramercy’s pitch to clients that it can deliver returns, no matter what the broader market does. “It’s becoming an important area for us in global markets,” said founder Robert Koenigsberger. “We feel like we are coming into the sweet spot of litigation funding.”
According to an investor, Gramercy’s flagship fund is up 15 per cent year to date.
The litigation funding market was $15.8bn last year and is predicted to grow by 9 per cent annually over the next five years, according to RationalStat.
In the mine case, Pogust Goodhead stands to share as much as 30 per cent of the settlement with local Brazilian lawyers if their case is successful.
“This transaction with Gramercy . . . gives us the ability to bring the fight to any wrongdoer,” Harris Pogust, the firm’s chair, said in a statement.
The structure of Gramercy’s investment as a secured loan avoids the legal concerns raised by a UK Supreme Court decision over the summer about litigation funding arrangements that involve a share of the proceeds. That decision voided the funding agreement in a competition case brought by the Road Haulage Association and other hauliers against DAF and other truckmakers.
Pogust Goodhead has previously received two rounds of funding totalling £150mn from NorthWall Capital, a London-based credit specialist.
“These claims are real but (the law firm) was financially depleted,” said James Taylor, who heads special situations at Gramercy. “This gives them the financial power to finish the job. The defendants are not going to be able to wait them out.”